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Study: Smoking bans can hurt restaurants, bars

Wednesday, January 23, 2008

ST. LOUIS (AP) -- Familiar faces are missing at Betty Hamilton's bar in Columbia.

The Tiger Club clientele is largely blue-collar workers middle-aged and older. Until January 2007, many of them smoked. But in the year since the mid-Missouri town banned smoking in most public places, business has decreased nearly one-third, Hamilton said Wednesday.

That's no surprise to economist Michael R. Pakko of the Federal Reserve Bank of St. Louis, whose recent study showed that while towns like Columbia may see health benefits from smoking bans, the economic impact can be detrimental.

"All too often policy makers are given this package of smoking bans are good for health and there is no impact on business," Pakko said in a telephone interview. "Certainly it's not going to cause a town to go into the tank, but it will have a negative impact on some businesses."

Pakko's report appears in the January issue of The Regional Economist, a periodical of the St. Louis Fed.

The smoking bans are hardest on bars, Pakko said. He cited two studies showing both job losses and lost revenue due to the bans.

Bars and restaurants in states like Missouri with a high percentage of smokers are hit harder by smoking bans. Their employment losses tend to be significantly larger, Pakko said.

Climate is also a factor, according to his study -- establishments in warm-weather communities with smoking bans fared better than those in colder climates, probably because outdoor seating for smokers is a more viable option in warmer climates.

Pakko looked specifically at Columbia, where the city council banned smoking in most public areas effective Jan. 9, 2007. He examined sales tax data for the first seven months after the ban and estimated that sales declined 5 percent at bars and restaurants.

Pakko said his study took into account factors such as seasonal fluctuations, an overall downturn in retail sales and an unusually harsh winter.

Mayor Darwin Hindman characterized the ban as a big success. He blamed the failure of some establishments -- more than a dozen bars and restaurants have closed in the past year -- on a recent glut of new restaurants.

"When you have a change, whether it be a market change or regulatory change, some people adjust better than others," Hindman said.

The council's 4-3 vote in favor of the ban came after a committee of health experts suggested it.

"I'm firmly convinced in my own mind that there is an extreme health issue related to second-hand smoke," Hindman said. "I believe the benefits are enormous and the restaurants are going to do fine in Columbia."

Hamilton said her bar will survive, but business isn't what it used to be.

"I haven't seen some of my regulars in forever," Hamilton, 47, said. "They go out to bars in the county, where they can smoke."


On the Net:

http://research.stlouisfed.org.


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